Fuel prices go north again, experts say it’s fallout of GST

BENGALURU: Motor fuel prices in Karnataka are on the verge of scaling a new high within a month of the state government slashing sales tax and days after the Centre reducing excise duty.

Industry experts say the modalities of the goods and service tax (GST) implementation is the reason for the issue threatening to spin out of control.

On Sunday, petrol and diesel were being sold here at Rs 83.37 and Rs 75.77 per litre, respectively. The prices were the highest at Rs 84.59 and Rs 76.10 on September 17 just before the state government reduced sales tax.

“The price rise has neutralized the tax cuts and is threatening to create an irreversible crisis if corrective measures are not taken immediately,” said M Prabhakar Reddy, chairman, All-India Petroleum Dealers Association.

The spiralling prices are not only linked to increasing crude oil prices but also the falling rupee, which experts say has to do with faulty implementation of GST.

“Exports have shown only marginal growth in the GST regime. The falling exports have widened the trade deficit, weakening the rupee further and pushing up the import cost. There has been no control over prices of motor fuels which are among major commodities that India imports,” said S Sampathraman, chairman of Assocham, Karnataka Council.

Exports had registered a 9.78% year-on-year growth (in dollar terms) during 2017-18. But there are indications that exports had slumped after GST was introduced in July last year. Exports recorded a negative year-on-year growth of 0.66% in dollar terms and 1.95 % in rupee terms in March this year. According to Assocham officials, there’s only a marginal recovery in exports till September-end.

‘Delay in refund to blame’

Exporters are blaming the delay in refund of GST paid on raw materials. Their working capital has been locked up with the government as refund to the tune of Rs 23,000 crore is pending for months now, they said. The Centre, though, has disputed the claim, saying that the figures were exaggerated.

“While the figures are legitimate, the fact is that the issues that remained unaddressed in the GST regime are dogging the export sector,” said Dr A Sakthivel, chairman, Federation of Indian Export Organisations (FIEO), southern region.

An officebearer of FIEO said it takes more than six months for an exporter to get refund on the GST paid, which was not the case in the earlier Value Added Tax (VAT) regime. “Earlier, the exporters were exempted from 12.5% excise duty on their purchase of raw materials and they would get 5.5% VAT paid on inputs. As all taxes have been subsumed in GST, exporters end up paying tax up to 28% and the delay in refund has just made their business unviable,” said JR Bangeara, exporter and former president of the Federation of Karnataka Chambers of Commerce and Industries.

He said the Centre must consider exempting exporters from GST on purchase of materials. “This is an effective solution as it will eliminate the rigmarole of the refund procedure,” said Bangera.

‘Improper documentation’

Admitting to procedural delays in tax refund, AK Jyothishi, principal chief commissioner of customs and central excise, attributed it to improper documentation by exporters. “When the documents they submit are not matching with their tax returns, they have to approach the customs officers to set things right. This may be causing a delay in the refund procedure,” Jyothishi said, adding, “Otherwise, we have a system to pay refund online as and when the claims are made.”